Multinational companies face many challenges in their international business dealings due to the environments they operate in which are commonly less regulated, are not democratically governed with legal systems to solve ethical and social responsibility dilemmas and are full of corruption. Managers are consequently faced with many unfamiliar economic conditions, cultural values and competitive variables (Grace and Cohen, 2000:180).
Wild, Wild & Han (2010:128) define ethical behaviour as personal behaviour, which is in accordance with guidelines for good conduct or morality, and corporate social responsibility as the act of companies going above and beyond their legal obligations in order to maintain their commitments to their stakeholders.
Due to the differences in legal standards between countries and economic activities now being more globally integrated, many companies find themselves enticed to exploit these differences in order to seek higher profit margins. This is commonly achieved through the exploitation of business locations in countries whose business laws are less scrutinised, mostly the developing world. Concern has been expressed internationally to the role of these multinational firms making profits through conduct considered inappropriate, making corporate social responsibility extremely important for the prosperity and future of multinational companies (Wild, Wild & Han, 2010:128).
These legal differences managers are faced with become ethical issues, as there is no right or wrong decision, instead is dependent on one’s ethical stance and perspective. An argument therefore arises as to whether there should be universal moral standards for multinational companies.
Cultural relativism explains the culture-specific right and wrongs i.e. an action which is seen as ethical in one country may be considered immoral in another. Due to the moral values being relative to particular environments, “when in Rome, do as the Roman’s do” is at the heart of cultural relativism, meaning that businesses are obliged to operate in a manner acceptable to the host country, legally and morally (Grace and Cohen, 2000:20).
The many legal and ethical issues facing international business in the world today include; bribery and corruption, labour conditions, human rights, fair trade practices and the environment. Companies are aware of the competitive advantage, which can be gained through practising corporate social responsibility. Fair trade practices encourage companies to work with suppliers in ‘equitable, meaningful and sustainable ways” (Wild, Wild & Han, 2010:132).
An example of a multinational company practising corporate social responsibility in term of fair trade practices is Starbucks ‘fair trade coffee’. Starbucks achieves this through helping citizens in poor coffee producing countries to farm in environmentally friendly ways whilst also making sure the coffee farmers make a fair profit from their coffee crop (Wild, Wild & Han, 2010:132).
Wild, Wild & Han (2010:129) explain the prevalence of bribery and corruption in various countries as; ‘bribes are routinely paid to distributors and retailers to push a firms product through distribution channels, to gain important contracts and to avoid being completely shut out of a market’. Countries corruption levels are rated on a CPI (corruption perceptions index). It is no surprise that the least developed nations are seen to be the most corrupt, such as Russia and the Middle East (Wild, Wild & Han,2010:129).
According to Wild, Wild & Han (2010:129), the issues which arise with bribery and corruption include; sending resources to inefficient uses, hurting economic development, distorting public policy and damaging national integrity.
Human rights and labour conditions are an example of ‘a grey zone…with no tight prescriptions for a company’s behaviour’. Managers must make their own decisions regarding issues such abuse of children and forced labour,...
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